Employers with 50 or More Employees

Key Provisions Under the Affordable Care Act for Employers with 50 or More Employees

Some of the provisions that may impact employers with 50 or more employees include:

Employer Shared Responsibility Provisions

Starting on January 1, 2015, employers with 100 or more full-time (or full-time equivalent) employees that do not offer health insurance to their full-time employees (and dependents), or that offer coverage that is not affordable or that does not provide minimum value, may be required to pay an assessment if at least one of their full-time employees receives a premium tax credit to purchase coverage in the new individual Marketplace. Employers with at least 50 but fewer than 100 full-time or full-time equivalent employees will generally have an additional year, until 2016, before these rules apply. A full-time employee is one who is employed an average of at least 30 hours per week. If a business meets the threshold level of 100 full-time or full-time equivalent employees (50 employees starting in 2016), or is close to it, it’s important to understand how these rules may apply and how the payment amounts could be calculated. Refer to these FAQs from the IRS for the latest information on the Employer Shared Responsibility rules. Businesses with fewer than 50 employees are generally not affected by the Employer Shared Responsibility rules – that is nearly 96 percent of all firms in the United States. These smaller employers do not have to pay an assessment if their full-time employees receive premium tax credits in the new Marketplace.

Information Reporting on Health Coverage by Employers

Beginning in 2015, the Affordable Care Act provides for information reporting by employers with 50 or more full-time employees (including full-time equivalent employees regarding the health coverage they offer to their full-time employees (known as Section 6056 rules). New information reporting by issuers, self-insuring employers, and other parties that provide health coverage also take effect in 2015 (Section 6055 rules). The first of these reports must be filed in early 2016. Refer to these Q&As from IRS for more information about the new reporting requirements.

Employer Health Care Arrangements (Employer Payment Plans)

Employer health care arrangements, also known as employer payment plans, generally include those arrangements where the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace). Under IRS Notice 2013-54, such arrangements do not satisfy the market reforms under the Affordable Care Act and may be subject to $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code. S CorporationException: Under IRS Notice 2015-17, S corporations may continue to report reimbursements of health insurance of 2 percent shareholders until further guidance is issued, and in any event through the end of 2015, and the excise tax will not apply to a 2-percent shareholder-employee healthcare arrangements. For more information about employment payment plans generally and the temporary relief for certain entities, refer to IRS’s FAQs.

Under ACA, insurance companies must spend at least 80% of premium dollars on medical care rather than administrative costs. Insurers who do not meet this ratio are required to provide rebates to their policyholders, which is typically an employer who provides a group health plan. Employers who receive these premium rebates must determine whether the rebates constitute plan assets. If treated as a plan asset, employers have discretion to determine a reasonable and fair allocation of the rebate. For more information on the federal tax treatment of Medical Loss Ratio rebates, refer to IRS's FAQs.

W-2 Reporting of Aggregate Health Care Costs

Effective January 2013, most employers must report the aggregate annual cost of employer-provided coverage for each employee on the Form W-2. The new W-2 reporting requirement is informational only and it does not require taxation on any health plan coverage. Reporting is required for most employer-sponsored health coverage, including group medical coverage. Small Employer Exception: For 2012 reporting and beyond until further guidance is issued, the W-2 reporting requirement does not apply to employers required to file fewer than 250 Form W-2s in the prior calendar year. To learn more about the requirements, as well as exclusions, visit this page at IRS.gov.

Limits on Flexible Spending Account Contributions

For plan years beginning on or after January 2013, the maximum amount an employee may elect to contribute to health care flexible spending arrangements (FSAs) for any year is capped at $2500, subject to cost-of-living adjustments. Note that the limit only applies to elective employee contributions and does not extend to employer contributions. To learn more about FSA Contributions, as well as what is excluded from the cap, refer to this document provided by the IRS.

Additional Medicare Withholding on Wages

Effective January 1, 2013, the ACA increases the employee portion of the Medicare Part A Hospital Insurance (HI) withholdings by .9% (from 1.45% to 2.35%) on employees with incomes of over $200,000 for single filers and $250,000 for married joint filers. It is the employer’s obligation to withhold this additional tax, which applies only to wages in excess of these thresholds. The employer portion of the tax remains unchanged at 1.45%.

New Medicare Assessment on Net Investment Income

Effective January 1, 2013, a 3.8% tax will be assessed on net investment income such as taxable capital gains, dividends, rents, royalties, and interest for taxpayers with Modified Adjusted Gross Income (MAGI) over $200,000 for single filers and $250,000 for married joint filers. Common types of income that are not investment income are wages, unemployment compensation, operating income from a non-passive business, social security benefits, alimony, tax-exempt interest, and self-employment income.

90-Day Maximum Waiting Period

As of January 1, 2014, individuals who are eligible for health coverage will not have to wait more than 90 days to begin coverage. HHS, IRS, and the Department of Labor have issued final rules on how employers should apply the 90-day rule.

Workplace Wellness Programs

The ACA creates new incentives to promote employer wellness programs and encourage employers to take more opportunities to support healthier workplaces. Health-contingent wellness programs generally require individuals to meet a specific standard related to their health to obtain a reward, such as programs that provide a reward to employees who don’t use, or decrease their use of, tobacco, and programs that reward employees who achieve a specified level or lower cholesterol. Under final rules that took effect on January 1, 2014, the maximum reward to employers using a health-contingent wellness program increased from 20 percent to 30 percent of the cost of health coverage. Additionally, the maximum reward for programs designed to prevent or reduce tobacco use is as much as 50 percent. The final rules also allow for flexibility in the types of wellness programs employers can offer. For more information visit DOL.gov.

Timeline of Provisions

The Affordable Care Act timeline provided by the U.S. Department of Health and Human Services includes the next steps you can take to implement the provisions.